IT Project Management, Third Edition Chapter 11 1 Chapter 6: Project Risk Management

IT Project Management, Third Edition Chapter 11 2 The Importance of Project Risk Management Project risk management is the art and science of identifying, analyzing, and responding to risk throughout the life of a project and in the best interests of meeting project objectives Risk management is often overlooked on projects, but it can help improve project success

IT Project Management, Third Edition Chapter 11 3 What is Risk? “the possibility of loss or injury” What is a project risk? Project risk involves understanding potential problems that might occur on the project and how they might stop project success Risk management is like a form of insurance; it is an investment

IT Project Management, Third Edition Chapter 11 4 What is Project Risk Management? The goal of project risk management is to minimize potential risks while maximizing potential opportunities. Major processes include  Risk management planning: deciding how to approach and plan the risk management activities for the project.  Risk identification: determining which risks are likely to affect a project and documenting their characteristics  Quantitative risk analysis: measuring the probability and consequences of risks and estimating their effects on project objectives.  Risk response planning: taking steps to enhance opportunities and reduce threats to meeting project objectives. Using outputs from the preceding risk management processes, project teams can develop a risk response plan.  Risk monitoring and control: monitoring known risks, identifying new risks, reducing risks, and evaluating the effectiveness of risk reduction throughout the life of the project.

IT Project Management, Third Edition Chapter 11 5 Risk Management Planning The main output of risk management planning is a risk management plan The project team should review project documents and understand the organization’s and the sponsor’s approach to risk

IT Project Management, Third Edition Chapter 11 6 Emergency and Fallback Plans Emergency plans are predefined actions that the project team will take if an identified risk event occurs Fallback plans are developed for risks that have a high effect on meeting project objectives

IT Project Management, Third Edition Chapter 11 7 Common Sources of Risk on Information Technology Projects Several studies show that IT projects share some common sources of risk The Standish Group developed an IT success potential scoring sheet based on potential risks McFarlan developed a risk questionnaire to help assess risk

IT Project Management, Third Edition Chapter 11 8 McFarlan’s Risk Questionnaire

IT Project Management, Third Edition Chapter 11 9 Risk Identification Risk identification is the process of understanding what potential unsatisfactory outcomes are associated with a project Several risk identification tools and techniques include  Brainstorming  The Delphi technique  Interviewing  SWOT analysis

IT Project Management, Third Edition Chapter Potential Risk Conditions Associated with Each Knowledge Area

IT Project Management, Third Edition Chapter Risk Response Planning After identifying and quantifying risks, you must decide how to respond to them Four main strategies:  Risk avoidance: eliminating a specific threat or risk, usually by eliminating its causes  Risk acceptance: accepting the consequences should a risk occur  Risk transference: shifting the consequence of a risk and responsibility for its management to a third party  Risk mitigation: reducing the impact of a risk event by reducing the probability of its occurrence

IT Project Management, Third Edition Chapter Risk Monitoring and Control Monitoring risks involves knowing their status Controlling risks involves carrying out the risk management plans as risks occur Workarounds are unplanned responses to risk events that must be done when there are no emergency plans The main outputs of risk monitoring and control are corrective action, project change requests, and updates to other plans

IT Project Management, Third Edition Chapter Results of Good Project Risk Management Unlike crisis management, good project risk management often goes unnoticed Well-run projects appear to be almost effortless, but a lot of work goes into running a project well Project managers should strive to make their jobs look easy to reflect the results of well-run projects

IT Project Management, Third Edition Chapter Using Software to Assist in Project Risk Management Databases can keep track of risks. Many IT departments have issue tracking databases Spreadsheets can aid in tracking and quantifying risks More sophisticated risk management software, such as Monte Carlo simulation tools, help in analyzing project risks